The economic case for cooperatives in developed and developing countries: are there any special characteristics in particular country settings: A case of Mondragon, Spain and Kenya Otieno Steven Country Representative, Kenya 26 th March 2019, NAIROBI-KENYA
The National Cooperative Business Association CLUSA International Established in 1916, NCBA CLUSA is the oldest and largest U.S. trade association for cooperatives—representing all co-op sectors. Sectors Examples Agriculture Food Retail Credit Unions Electric Financial Services Worker Child Care & Preschool Purchasing Co-op Breweries Credit Union Healthcare Housing
Cooperatives building an Inclusive Economy In 2017, the NCBA CLUSA Board adopted a vision that positions the association as a collaborative partner in, advocating for and driver of: An Inclusive Economy in which people around the world are empowered to contribute to shared prosperity and well- being for themselves and future generations NCBA CLUSA will leverage the co-operative model and the shared resources of our movement to engage, partner with and empower people from all walks of life, and in particular those left behind by a shifting economy who face the greatest barriers to achieving this goal.
Kenya
An overview of a journey from 1908 It is comprised of over 22,000. • The leading cooperative nation-state in Africa registered Co-operative Societies Has a membership of over 14 million • people. Co-operatives cut across all sectors • of the national economy such as financial, agricultural, housing, transport among others Has total asset base of over Kshs. 800 • billion; With mobilized savings in excess of • US$ 6.4 billion constituting over 48% of national savings (IMF, World Bank Economic Outlook 2014), which has significantly contributed to the provision of affordable credit.
An overview of a journey from 1908 The total affordable credit to the co-operators stood at US$ 3.31 Billion in • 2017 with a recent survey that covered a period of 5 years revealing that;- - US$ 1.18 Billion or 36% credit financing went to land & housing - US$ 670 Million was channeled to the trade sector accounting for 20.5% Financing of consumption & social activities accounted for US$ 470 • Million or 14.5% of the total credit given by the Sacco sector. Education & agricultural sectors received Kshs. 39 Billion & 21 Billion • respectively or 12 % of total credit financing. On employment, Co-operatives secures direct and indirect livelihoods to • around 32 million Kenyans that is two-thirds of our population; Employs over 600,000 persons directly. •
Salient challenges in the cooperative sector • High cost of finance in Kenya Lack of harmonization of the co- • thereby making credit expensive; operative legal framework with the Inadequate market access; Constitution of Kenya (2010); resulting • Indebtedness by co-operative to inadequate supervision and audit at • enterprises particularly those the county level leading to loss of engaged in commodities and members contributions. • agricultural production; The dual legal incorporation of co- Inadequate research in emerging operatives under both the Companies • co-operative products and services; Act, and the Co-operative Societies Act Low participation of youth, women which complicates supervision and • and people living with disabilities regulation. • Low adoption of ICT and use of Indebtedness by co-operatives • manual (paper-based) operations; particularly those engaged in Lack of credible data and commodities and agricultural • information production; Weak governance in co-operatives; •
Remedial action towards enabling the co-operative business model Finalize and implement the National Cooperative Development Policy • and the related legislations. Put in place good co-operative governance with a clear separation • between the roles of the management and the board Widen the role of Sacco’s to not only undertake savings mobilization, • investments and credit management but also to venture into; participating in the National Payment System ; Agency Banking and Share Trading . The Agricultural Co-operatives are expected to play a critical role in the • various value chains in terms of:- Adoption of mechanisation and provision of farm inputs to their members to improve • production Getting markets for the agricultural produce for the members. • Carry out value addition on the raw produce for increased incomes. • Access government support e.g. of transportation and improved storage technologies such • as milk coolers and silos. Introduction of Co-opFarms • Co-operative Civic Education, Training & Research is being enhanced as upheld by • the co-operative values and principles. ICT adoption to enhance efficiency and protect against cybercrime/fraud. •
Mondragon, Spain
Spain; The Mondragon model in the Basque Country Mondragon model founded in 1956 by Father José María Arizmendiarrieta, the Mondragon Cooperative Corporation currently consists of 102 federated cooperatives employing over 73,000 people.
Foundation of the Mondragon model “Nothing differentiates people as much as their respective attitudes to the circumstances in which they live . Those who opt to make history and change the course of events themselves have an advantage over those who decide to wait passively for the results of the change. ”Jose María Arizmendiarrieta (1915 – 1976)
Mondragon, Spain - as a non-capitalist alternative model Mondragon Corporation (MC) is the most successful business group in the Basque Country, and the seventh largest in Spain; as a cooperative group it is unique in the world Mondragon proves this It is argued that a company cannot be both efficient and dichotomy as incorrect; equitable at the same time; • Efficiency is associated with traditional capitalist • It has created a cooperative structure companies, which pursue it at the expense of equity; which is highly meanwhile equity is associated with cooperatives, and competitive in the is perceived as a trade-off for expansion and efforts to capitalist market. become truly competitive. • It is highly egalitarian • A choice is often made between small equitable and democratic in its cooperatives and efficient competitive companies, in a approaches to global economy and market logic in which no other management option seems possible.
Mondragon, Spain - as a non-capitalist alternative model The Mondragon Corporation, a group of cooperatives, is a thriving example of how cooperatives can succeed. Developed on 6 features that show this The five successful actions also reflect this humanistic focus approach Democracy leading to • Created a banking system to • competitiveness, connect all the individual cooperatives; Solidarity in profit for economic • growth, It re-invests its profits • Solidarity among workers across the • Emphasizes a humane management • corporation, orientation; An egalitarian salary scale, • It reinforces both open intellectual • debates and grassroots democracy, Maximum job security and minimum • temporary work, It has created its own social security • system. Specific advantages for members. •
Mondragon, Spain – aspirations and impact Has most equal income distribution , and thus the fewest social inequalities • In the Basque Country in general, the unemployment rate is currently 8,8% compared • to 20,8% in Spain overall , a factor attributed to the Mondragon corporation Frequently, cooperatives limit their economic activity to small, marginal markets, and • either subsist on state subsidies or require that their workers to make great sacrifices (self-exploitation) in order to survive. The choice to be a cooperative is often based on ideology rather than efficiency . • The cooperatives within Mondragon Corporation, however, are competitive in • different sectors of the economy including: industry, distribution, finance and knowledge.
Thank You National Cooperative Business Association NCBA CLUSA International Program 1775 Eye Street, NW • 8th Floor Phone: (202) 638-6222 Email: info@ncba.coop Web site: http://www.ncba.coop
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